December 2009 - Business

U.S. online holiday spending rose 5 percent

U.S. online spending rose 5 percent to $27.12 billion from the start of November through Christmas Eve even though individuals spent slightly less than they did last year, according to data released by comScore on Wednesday.

Adjusting for the impact of an additional shopping day between Thanksgiving and Christmas versus 2008, sales rose only about 3.5 percent, the analytics firm said.

Sales of consumer electronics jumped slightly more than 20 percent and jewelry and watches were also strong performers after a "very weak" season a year earlier, comScore Chairman Gian Fulgoni said in a statement.

In 2008, online sales as tracked by comScore fell 3 percent.

Stocks fluctuate as dollar strengthens

Stocks fluctuated Wednesday as good news on manufacturing helped offset a decline in commodities prices.

The market got support from a key economic indicator that signaled growth in the Midwest manufacturing industry for a third straight month. The Chicago Purchasing Managers Index rose to 60 in December from 56.1 in November. The report showed that production and new orders increased and employment improved.

But the market's gains were held back by a stronger dollar and a subsequent drop in energy and material stocks. A jump in the dollar makes commodities, and thus the shares of companies that produce commodities, less attractive to foreign buyers. It also hurts the profits of companies that do business overseas.

Some investors have been buying the dollar in recent weeks on the belief that the economy is improving and the Federal Reserve will raise interest rates in the next year. That buying interest comes after a months-long slide in the greenback.

Rock-bottom interest rates have encouraged investors this year to move out of cash and into riskier assets such as stocks and commodities that have the potential to earn bigger returns. While a rise in interest rates would be a sign that the economy is on the right track, it could hurt the stock market's advance.

After a 24.7 percent rise in the Standard & Poor's 500 index this year, many investors have closed their books and are making few moves ahead of the start of 2010. Fewer traders in the market can lead to more volatility.

"We've seen oil up and down, the dollar up and down, the market up and down," said Frank Ingarra, co-portfolio manager at Hennessy Funds. "I don't think we'll see a major move one way or the other."

At midday, the Dow Jones industrial average was down 0.30, or roughly unchanged, at 10,545.11. The Standard & Poor's 500 index fell 1.09, or 0.1 percent, to 1,125.10, while the Nasdaq composite index fell 1.76, or 0.1 percent, to 2,286.64.

The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, rose 0.3 percent. Gold and other metals fell. Oil prices added 80 cents to $79.67 a barrel on the New York Mercantile Exchange.

Bond prices were mixed ahead of an auction of seven-year notes, the last of the government's issuances this week. In total, the Treasury is auctioning off $118 billion of new debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.81 percent from 3.80 percent Tuesday. Interest rates on many consumer loans track the yield on the 10-year Treasury.

There were also plenty of reminders Wednesday that companies are still hurting from the blows of the recession.

The government was preparing to extend another multibillion loan to GMAC Financial Services to further stabilize the auto financing company, according to a person familiar with the matter. GMAC, instrumental to the operations of automakers General Motors Co. and Chrysler Group LLC, has already received $12.5 billion in taxpayer money and is 35 percent owned by the federal government. The person, who spoke on condition of anonymity because discussions weren't complete, said the bailout would be in the range of about $3 billion.

Meanwhile, health insurer Aetna Inc. said it expects to take a fourth-quarter charge of up to $65 million to cover the costs of layoffs and consolidations.

The pullback in stocks added to modest losses on Tuesday when the market ended a six-day winning streak as reports on home prices and consumer confidence failed to rally investors. While the reports showed improvement, they were largely in line with expectations and painted a picture of a slowly recovering economy.

About three stocks fell for every two that rose on the New York Stock Exchange, where volume came to a low 247 million shares.

In other trading, the Russell 2000 index of smaller companies fell 1.48, or 0.2 percent, to 631.70.

Overseas, Japan's Nikkei stock average fell 0.9 percent. Britain's FTSE 100 fell 0.7 percent, Germany's DAX index lost 0.9 percent, and France's CAC-40 fell 0.6 percent.

WSJ: GM offering deep discounts on Saturn, Pontiac

General Motors Co. is offering deep discounts on its remaining Saturn and Pontiac vehicles as it looks to move the leftover inventory of the soon-to-be-dead brands, according to a published report.

The automaker will pay dealers $7,000 for every new Saturn or Pontiac left on their lot if the vehicle is moved to dealer-operated rental or service fleets, according to The Wall Street Journal, which cited a letter mailed to dealers. This allows the dealers to sell the cars and trucks to consumers at a discount, although the vehicles would be labeled as used because the dealer would technically be the first owner.

The offer expires Jan. 4, according to the newspaper. GM spokesman Tom Henderson confirmed the details of the incentive plan Tuesday.

"That was the purpose of the programs — to help dealers reduce those inventories," he said.

The decision to discount Saturns and Pontiacs comes as GM closes down both brands under the Detroit automaker's restructuring plan. The shutdown of Pontiac was announced earlier in the year. GM announced this fall it would discontinue Saturn after a deal collapsed to sell the brand to Penske Automotive Group Inc.

Besides Pontiac and Saturn, GM is selling Hummer to a Chinese heavy equipment maker and is likely shuttering Swedish brand Saab. That will leave the automaker with four core brands: Buick, Chevrolet, GMC and Cadillac.

Sales of Saturn and Pontiac have declined sharply this year. Saturn sales have plunged 61.5 percent through November, according to Autodata Corp. Pontiac sales have slid 32.3 percent. GM's companywide decline is 31.8 percent.

With a $7,000 discount, the manufacturer's suggested price of Pontiac's cheapest vehicle, the G3 hatchback, falls to $7,335. The incentive brings Saturn's cheapest vehicle, the Astra compact car, to $9,495. Henderson, however, cautioned that the final price of the vehicles might be different.

GM's typical offers discounts that are much smaller. According to the auto research Web site Edmunds.com, GM's incentive spending in November totaled $4,270 per vehicle, on average.

Fewer consumers finish holiday buying: survey

An unprecedented 22 percent of U.S. consumers said they did not finish their Christmas shopping this year as fewer discounts kept many wallets closed, according to a survey released on Tuesday.

While nearly 63 percent said bigger deals were needed to loosen their purse strings, about 11 percent blamed bad weather that hit the U.S. East Coast and Midwest on the weekend before Christmas, according to Britt Beemer, founder of consumer research and marketing firm America's Research Group.

"This is the lowest number of consumers finishing shopping in all my 26 years of tracking retail sales during the holiday season," Beemer said.

In a typical year, 82 percent to 88 percent of consumers complete their holiday shopping, he said.

"Many of those who didn't finish said they couldn't afford to spend more," Beemer said. Many consumers decided to give cash instead of presents, which ultimately may not be used for store purchases.

Others opted for gift cards, but the most popular amount was a lower $20, versus $25 to $30 in 2008.

According to the survey, overall online shopping did not benefit from these trends, as 42 percent of shoppers said they bought gifts on the Web, compared with 41 percent a year ago.

Retailers have sought to limit discounting in a bid to protect their margins this season, but retraining shoppers -- who saw discounts of as much as 70 percent last year -- is more easily said than done.

Beemer's survey was based on telephone interviews of 1,000 consumers on December 26-27, and has a margin of error of plus or minus 3.8 percent.

Stocks mixed after housing, confidence data

Stocks fluctuated in a narrow range Tuesday after reports on home prices and consumer confidence came in largely as expected, showing a gradual improvement in the economy.

Major indexes had risen modestly in the early going, but were mixed in afternoon trading as the dollar strengthened and tugged on commodities prices. A stronger dollar makes commodities more expensive for foreign buyers. Energy and material stocks fell in response to the drop in commodities.

Trading was quiet, as it has been in recent days. Many investors were taking vacation between Christmas and New Year's Day. Even in light volume though, the market has managed to climb. The Standard & Poor's 500 index has posted gains for six straight days, rising 2.3 percent to reach a new high for the year.

Earlier Tuesday, the Conference Board said its index of consumer confidence rose to 52.9 in December from 49.5 in November. That was slightly better than the reading of 52 economists had forecast.

The index is still a long way from what is considered healthy. A reading of 90 or more signals a solid economy. However, the index has risen significantly from a historic low of 25.3 in February.

A report on home prices also showed a slight improvement. The Standard & Poor's/Case-Shiller's home price index rose for a fifth straight month in October, edging up 0.4 percent. The index was off 7.3 percent from October last year, roughly in line with expectations.

Analysts said there were few surprises in the economic data to drive the market one way or the other.

"The reports we're seeing broadly reinforce the expectations we've had," said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors in Kalamazoo, Mich. "It's slow and steady; It's not explosive improvement."

In early afternoon trading, the Dow Jones industrial average rose 0.12, or 0.1 percent, to 10,557.20. The S&P 500 index slipped 0.62, or 0.1 percent, to 1,127.16, while the Nasdaq composite index fell 2.49, or 0.1 percent, to 2,288.59.

Interest rates were little changed following a successful auction of $42 billion of five-year notes. The Treasury Department is issuing a total of $118 billion of debt this week as part of its ongoing efforts to fund its stimulus programs. With so much debt flooding the market, there's been concern this year that demand would diminish. Most auctions though have been able to attract decent demand.

The yield on the 10-year Treasury note, which is used as a benchmark for consumer loans, held steady at 3.85 percent.

The dollar reversed an early slide and moved higher against other currencies. Oil prices fell 4 cents to $78.73 a barrel on the New York Mercantile Exchange. Gold prices also fell.

Reports showing an increase in durable goods orders and a decline in claims for unemployment benefits helped spur the market higher last week. On Monday, investors were encouraged by a jump in retail sales.

Tim Speiss, chairman of Personal Wealth Advisors practice at Eisner LLP in New York, said he expects to see the market build on its recent gains at the start of the new year and through the first quarter.

"We're going to be building momentum," he said.

Advancing stocks were roughly even with those that fell on the New York Stock Exchange, where volume came to a low 303.5 million shares.

In other trading, the Russell 2000 index of smaller companies fell 0.85, or 0.1 percent, to 632.90.

Overseas, Japan's Nikkei stock average inched up 0.04 percent and Hong Kong's Hang Seng index gained 0.1 percent. Britain's FTSE 100 rose 0.6 percent, Germany's DAX index added 0.1 percent, and France's CAC-40 rose 0.2 percent.

Consumer confidence extends rise in December

A more upbeat outlook on jobs pushed Americans' confidence in the economy higher in December for the second month in a row, a survey released Tuesday said.

Consumers' expectations for the job market over the next six months reached their highest level in two years, but Americans remain gloomy about their current prospects.

Meanwhile, a closely watched home price index released Tuesday showed that home prices rose for the fifth month in a row in October, but the recovery continues to be uneven with only 11 of the 20 metro areas tracked showing gains.

The Conference Board said its Consumer Confidence Index rose to 52.9, up from a revised 50.6 in November, but the reading is still far short of the 90 that would signify a solid economy. In October, consumer confidence was 48.7.

Economists surveyed by Thomson Reuters predicted a reading of 52 for December.

The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has taken a toll on consumers.

Economists watch consumer sentiment because spending on goods and services for consumers accounts for about 70 percent of U.S. economic activity by federal measures.

Stocks extended their increases into a seventh day following readings. In morning trading, the Dow Jones industrial average rose 23.05, or 0.2 percent, to 10,570.13.

One key component of the Confidence index that measures consumers' outlook over the next six months rose to 75.6 from 70.3 last month, the highest level since December 2007, when the index was 75.8. But the survey's other main component, which measures shoppers' current assessment, actually fell to 18.8 from 21.2.

The survey of 5,000 households ran Dec. 1 through 21.

"Regarding income, however, consumers remain rather pessimistic about their short-term prospects and this will likely continue to play a key role in spending decisions in early 2010," Lynn Franco, director of The Conference Board Consumer Research Center said in a statement.

Still, many retailers are breathing sighs of relief after the holiday selling season turned out better than expected, according to MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.

However, even though shoppers saw their confidence improve slightly and bought a bit more, they've been cautious in their spending. During the Christmas season, they focused on practical items for loved ones and even for themselves, while shying away from buying gift cards and opting for deeply discounted items instead.

Experts say such patterns might remain for several years amid unemployment that could be stubbornly high.

The unemployment rate dipped in November to 10 percent, down from a 26-year high of 10.2 percent in October. Some analysts worry it will again start to rise in coming months and won't peak until hitting 10.5 percent next summer.

Still, businesses cut their payrolls by a net of just 11,000 jobs in November, the smallest decrease since the recession started two years ago, according to the November job report.

For December, economists surveyed by Thomson Reuters expect that the unemployment rate will tick up to 10.1 percent, but they also expect no job losses on net when the government reports figures Jan. 8.

According to The Standard & Poor's/Case-Shiller index, home prices edged up 0.4 percent to a seasonally adjusted reading of 145.36 in October from September. The index was off 7.3 percent from October last year, nearly matching expectations of economists surveyed by Thomson Reuters.

The index is now up 3.4 percent from its bottom in May, but still almost 30 percent below its peak in April 2006.

The Conference Board survey showed that consumers' assessment of current conditions worsened in December. Those saying conditions are "bad" increased to 46.6 percent from 44.5 percent, while those saying business conditions are "good" decreased to 7.0 percent from 8.1 percent.

Consumers' six-month outlook improved in December. Those anticipating business conditions will be better over the next six months increased to 21.3 percent from 19.7 percent, while those expecting conditions will deteriorate declined to 11.9 percent from 14.6 percent.

The outlook for the job market was also more positive. The percentage of consumers expecting more jobs to become available in the months ahead increased to 16.2 percent from 15.8 percent, while those expecting fewer jobs declined to 20.7 percent from 23.1 percent. However, the proportion of consumers anticipating an increase in their incomes declined to 10.3 percent from 10.9 percent.

Storms, falling supply drives energy prices up

Oil prices rose above $79 barrel Monday for the first time in four weeks as an extended cold snap triggered an end-of-year rally in energy futures.

Benchmark crude for February delivery added 72 cents to settle at $78.77 a barrel in light, holiday trading on the New York Mercantile Exchange. Prices rose as high as $79.12 earlier in the day, the highest since Nov. 18.

Futures contracts for oil, natural gas and heating oil have all become more expensive this month as snow storms blanketed parts of the country and a sharp drop in supplies of crude and other fuels surprised traders.

More frigid temperatures are expected, with up to 4 inches of snow forecast for New England, and up to 7 inches of snow along the eastern shores of the Lower Great Lakes.

Spot prices are starting to perk up as a result.

According to the latest data from the Energy Information Administration, natural gas prices jumped earlier in December to the highest levels since January, and heating oil prices climbed during the middle of this month.

The EIA is expected to release its weekly survey on retail gas prices later Monday.

Still, the winter chill hasn't boosted energy demand above last year's levels. The U.S. is consuming less petroleum than it did at the same time last year, when oil and gas prices were cheaper and the economy was in recession.

American refiners have cut back on oil imports, which has helped reduce supplies and increase prices. But analyst Andrew Lipow said that oil prices also are rising as China and India expand their petroleum imports.

"That oil is finding a buyer somewhere," Lipow said.

At the pump, retail gas prices rose by less then a penny overnight to a new national average of $2.603 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

Gas prices have edged up for three consecutive days, albeit slowly, for the first time since the beginning of the month. A gallon of regular unleaded is 2.4 cents cheaper than last month.

In other Nymex trading in January contracts, heating oil climbed 3.79 cents to settle at $2.0735 a gallon while gasoline added 2.88 cents to settle at $2.0184 a gallon. Natural gas increased by 34.7 cents to settle at $5.99 per 1,000 cubic feet.

In London, Brent crude for February delivery rose $1.01 to settle at $77.32 a barrel on the ICE Futures exchange.

Amazon Says Kindle and E-Book Sales Set Records

Amazon.com said Monday that its Kindle e-reader has become the most gifted item in the company's history, but didn't provide specific sales numbers. The company said the Kindle, Apple's 8GB iPod touch, Garmin's nuvi 260W personal navigation device, and the BlackBerry Bold were among the most popular gadgets that customers purchased during the holiday shopping season this year.

The online retail giant also noted that its customers purchased more Kindle e-books than physical books on Christmas Day -- a first for the company. However, not everyone buying e-books from Amazon this holiday season will be reading them on dedicated Kindle devices.

Amazon has unleashed a Kindle app for the iPhone and iPod touch that users in 60 countries can download from Apple's App Store. Moreover, in November the online retailer released a free Kindle for PC application that enables customers to read Kindle books on notebooks, netbooks and desktop PCs.

A Cross-Platform Strategy

The reason for Amazon's adoption of a cross-platform platform strategy is clear. Less than one percent of U.S. consumers read digital content on dedicated e-readers, mobile phones, or netbooks today, noted Forrester Research analyst Sarah Rotman Epps. "Consumers are reading books digitally on multiple devices, and they will continue to do so," she observed in a recent blog.

According to a recent Forrester survey of 4,711 respondents, about three percent of U.S. consumers read e-books on their desktop computers, and two percent read them on their laptops. "Going forward, 19 percent of U.S. consumers say they are interested in reading e-books on their desktop PCs, 14 percent on e-readers, 11 percent on netbooks, and five percent on mobile phones," Rotman Epps added.

Amazon said its cross-platform moves are part of an evolving strategy under which the company also expects to release Kindle apps for BlackBerry smartphones and the Mac. All these platforms will offer the company's Whispersync technology, which saves and synchronizes bookmarks across a customer's devices, Amazon said.

The new strategy makes sense in light of Forrester's projection that e-book sales will top $500 million in 2010. "This is still small compared to the overall book market, but it's growing quickly," Rotman Epps observed.

The potential for selling content that's never been consumed digitally before is huge and helps to explain why Barnes & Noble recently launched its nook e-reader at the aggressive price of $259, Rotman Epps noted. Barnes & Noble's long-term strategy is "to profit not so much off device sales as off of e-book content sales," she explained.

The Challenges Ahead

One of the tough decisions that Amazon now faces is whether to maintain its proprietary e-book delivery platform or switch to an open format that allows books from other sources to be read on the Kindle or devices running Kindle apps. "The vast majority of the evolving digital-publishing ecosystem is rallying behind EPUB, with Amazon the lone wolf in the proprietary wilderness," noted Gartner Vice President Allen Weiner in a recent blog.

Amazon also will need to respond to the release of rival e-readers capable of accessing digital content directly from the web. Spring Design, for example, is poised to launch an e-reader called Alex that will sport a second color screen capable of accessing HTML-based digital content.

Weiner sees the addition of a browser to e-readers as the avenue through which the developer community could eventually become a key player in the e-book marketplace.

"Developers will gravitate toward the platform that offers them scale, room to innovate, and make money," Weiner said. "Waiting in the public shadows, perhaps with the ability to tie the pieces together -- format, device, development, content and sales -- is Apple."

Stocks edge higher as shoppers step up spending

Better holiday sales and rising commodities prices pushed stocks to their sixth straight gain and new highs for 2009.

Major indexes edged higher in light trading Monday after sales figures showed shoppers spent more freely this holiday season, a sign that consumers are feeling better about the economy.

Figures from MasterCard Advisors' SpendingPulse, which track all forms of payment, show retail sales rose 3.6 percent from Nov. 1 through Dec. 24, after dropping during that time last year. Adjusting for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent gain.

Consumer spending is one of the biggest drivers of economic growth and is important for a sustained recovery.

Meanwhile, commodities prices rose as the dollar fell, giving a boost to energy and materials stocks.

Airline stocks fell, helping to keep the market's gains in check, after two security incidents on Northwest flights this weekend. The Dow Jones transportation average fell 0.6 percent.

With fewer traders in the market due to the holidays, and without any bad news, analysts say stocks are likely to drift higher during the final days of 2009.

"What's going to stop this is a question on a lot of people's minds," said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors. "And the answer so far is nothing."

Markets were closed for Christmas and will be closed again Friday for New Year's Day.

The Dow Jones industrial average rose 26.98, or 0.3 percent, to 10,547.08, its highest close since Oct. 1, 2008. The Dow transportation average fell 24.37, or 0.6 percent, to 4,163.49.

The Standard & Poor's 500 index rose 1.30, or 0.1 percent, to 1,127.78, and the Nasdaq composite index advanced 5.39, or 0.2 percent, to 2,291.08.

Bond prices came off their lows after an auction of $44 billion of two-year notes saw sufficient demand. Bond prices have been falling in recent weeks, pushing yields higher as stocks continue to advance amid improving economic data.

In total, the Treasury Department is issuing $118 billion of debt this week. Investors have worried this year that demand for government debt would wane amid the massive amounts of supply. But so far, most auctions have gone smoothly.

The yield on the previously auctioned 10-year Treasury note, which moves opposite its price, rose to 3.85 percent from 3.80 percent Thursday.

Stocks added to moderate gains from last week, when stocks rose following upbeat reports on unemployment and durable goods orders. This week, readings on home prices and consumer confidence are among the few economic reports expected.

Stocks have managed to grind higher throughout December, but the gains have been more subdued than in recent months as investors have held back on making big moves going into the end of the year. The S&P 500 index is up 66.7 percent since hitting a 12-year low in March.

Commodities prices rose as the dollar fell. Commodities are priced in U.S. dollars, so when the greenback is weak they become more attractive to foreign buyers.

The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, slipped 0.1 percent.

Oil prices gained 72 cents to settle at $78.77 a barrel on the New York Mercantile Exchange. Gold also rose.

Shares of Delta Air Lines Inc., which owns Northwest, fell 48 cents, or 4.1 percent, to $11.29. A failed attack on a Northwest flight on Christmas Day and another incident on the same route to Detroit from Amsterdam on Sunday raised security concerns.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange where volume came to a light 705.4 million shares.

In other trading, the Russell 2000 index of smaller companies fell 0.32, or less than 0.1 percent, to 633.75.

Overseas, Japan's Nikkei stock average rose 1.3 percent to its highest close since late August, boosted by encouraging news on factory production. Germany's DAX index rose 0.8 percent, while France's CAC-40 rose 0.9 percent. Markets in Britain were closed for a holiday.

Audi plans euro7.3 billion investments through 2012

Audi AG said Monday it plans to spend euro7.3 billion ($10.51 billion) on plant upgrades, new products and technology research as it moves to expand its number of customers worldwide and increase market share.

Audi, based in Ingolstadt, and a unit of Volkswagen AG, said it plans to spend that amount from 2009 to 2012 and will increase the number of models from its current 34 to a planned 42 by 2015.

Of the investment, about euro5.9 billion will go toward new products and future technologies, or about 80 percent of its planned spending.

"With our planned investments in new products and mobility concepts — for example, electric propulsion — we are creating a basis for our company's future growth," said Axel Strotbek, who oversees finance and organization at the company.

Investors agreed, pushing Audi shares up nearly 4.2 percent to euro500 in Frankfurt trading.

The company also wants to expand its model line, adding the A1, A7, A8 and R8 Spyder to its production portfolio in 2010, along with the Q5 Hybrid, slated to reach the market in the beginning of 2011.

"We will be in a position to finance all our planned investments from our operative cash flow," Strotbek said.

The carmaker plans to spend heavily at its German plants, disbursing euro3.8 billion to its Ingolstadt and Neckarsulm plants from this year through 2012.

"This is a firm commitment to our German facilities. Audi is facing the technological upheaval in the automobile world in a farsighted way," said Peter Mosch, chairman of Audi's general works council.

Some euro2.5 billion will be invested at Ingolstadt, including on a new transmission and emission center, along with production of the A1. Another euro1.3 billion will be spent at Neckarsulm for production of the A6, A7 and A8 models.

Shoppers spend a little more during holiday season

Holiday shoppers spent a little more this season, according to data released Monday, giving merchants some reason for cheer.

The spending bounce means retailers managed to avoid a repeat of last year's disaster even amid tight credit and double-digit unemployment. Profits should be healthier, too, because stores had a year to plan their inventories to match consumer demand and never needed to resort to fire-sale clearances.

Retail sales rose 3.6 percent from Nov. 1 through Dec. 24, compared with a 2.3 percent drop in the year-ago period, according to figures from MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.

Adjusting for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent gain.

Last year, the economy was in "critical condition," said Michael McNamara, vice president at MasterCard Advisors' SpendingPulse. "This year, it's in stable condition."

A major winter storm that slammed the Northeast and shut in shoppers on the Saturday before Christmas derailed sales. But consumers appeared to have made up for the loss by shopping in advance of the storm and the days leading up to Christmas.

"We had a pretty decent surge," McNamara said.

Online sales were a particular hot spot, fueled by a big increase the weekend before Christmas. They rose 15.5 percent on the season, though they make up less than 10 percent of all retail sales.

One worrisome sign: Merchants are facing big hurdles to lure shoppers back in January amid lean inventories and what appear to be weak gift card sales. Gift card sales are recorded only when they are redeemed.

Stores count on a post-Christmas boost because of the growing importance of January on the retail sales calendar. Last year, the week after Christmas accounted for 15 percent of overall holiday sales, according to ShopperTrak, a research firm.

Retail consultant Burt P. Flickinger describes gift cards as "the lifeblood" of the post-Christmas season, because shoppers typically spend more than the value of the cards.

"Retailers with a disappointing December are going to need January to survive," Flickinger said. "Inventories are even too low for retailers."

Karen MacDonald, a spokeswoman at Taubman Centers Inc., said a survey among its centers this past weekend showed that merchants are on track to generate on average low single-digit sales increases from a year ago, though they still have a week to go.

MacDonald noted that the centers had a strong last-minute sales surge, and this past weekend, business has been strong. She added that 85 percent of shoppers are buying, 10 percent are exchanging and about 5 percent are returning items.

Gift card redemption rates have been discouraging this weekend, she said. They averaged 10 percent, based on a sampling of malls, she said. In good years, those rates are anywhere from 30 to 40 percent. That confirms that gift card sales were just "lukewarm," she said.

"Shoppers are seeing more value in deeply discounted merchandise" than buying gift cards, MacDonald said.

Ricki Smith, 30, of Prairie Village, Kan., had no returns and was hunting for bargains Saturday at the local Walmart store.

"Today, I bought mostly clearance stuff, stuff that got marked down to half-price, " she said. She added that there were a lot of leftover bath sets, which were mostly what she bought. "The Christmas area, the actual decorations, it was pretty picked over," she said.

Among the hottest sectors this shopping season, according to SpendingPulse:

• Consumer electronics, up 5.9 percent, helped by flat-panel TVs, smart phones, cameras and video games.

• Footwear, up 5 percent.

• Jewelry, up 5.6 percent. Last year, jewelry sales fell 30 percent.

Weaker area included luxury items, whose 0.8 percent increase came nowhere near making up for last year's 20 percent decline. Apparel sales fell 0.4 percent on top of a 19 percent decline last year.

A full picture of how individual retailers did will not be known until Jan. 7, when many report December sales.

Shoppers give stores last-minute sales surge

Shoppers appear to have given the nation's stores a needed last-minute sales surge.

Early readings from Toys R Us, Sears Holdings Corp. and several mall operators show packed stores on Christmas Eve following a busy week fueled by shoppers who delayed buying, waiting for bigger discounts that never came or slowed by last weekend's big East Coast snowstorm.

Stores are counting on these stragglers in a season that so far appears slightly better than last year's disaster. The jury is still out, because the week after Christmas accounts for about 15 percent of sales as gift card-toting shoppers return to malls.

"The procrastinators were really out in force," says David Bassuk, managing director in the retail practice of AlixPartners, a global business advisory firm. "But I think retailers needed to be more aggressive to fight for those sales. A lot of people are still willing to hold out until after Christmas because the deals weren't as good."

A Christmas Eve snowstorm in the nation's heartland were slowing some shoppers after snarling roads in the mountain states a day earlier.

At the Mall of America in Bloomington, Minn., shoppers were scarce and those who showed up had entire stores to themselves.

Steve Burns, 42, and his 15-year-old daughter, Amber, of Hastings, Minn., took advantage of the empty stores to browse for shirts and other last-minute gifts. Burns said the snow wasn't a problem and traffic was light because others stayed home.

"It doesn't bother me any," he said.

Some shoppers had challenges finding what they wanted as stores had slashed their inventories heading into the season. An Ann Taylor store at Westside Pavilion in West Los Angeles pulled in 33 cartons of January merchandise earlier than planned, according to Rebecca Stenholm, a company spokesman at the mall's operator, Macerich Co.

Joe Roberts, 59, left a RadioShack at a mall in Madison, Wis., with a huge smile and the PlayStation3 his teenage son insisted on for Christmas.

He said he delayed making the $300 purchase because of economic concerns. A self-employed designer of manufacturing equipment, Roberts is getting less business every year and his wife might soon lose her job as an office manager.

"I don't feel good about our outlook," he said.

Roberts said they nonetheless decided Wednesday to grant their son's wish, but then learned the video-game system was sold out at Best Buy, Walmart and other stores. Roberts finally connected with RadioShack early Thursday and braved icy roads to buy the store's last one.

Snowy weather can take a toll on sales. Research firm ShopperTrak reported Saturday's snow helped fuel a 12.6 percent drop in sales Saturday compared with a year earlier.

Wally Brewster, spokesman at General Growth Properties said merchants in his centers said they had made up for lost sales. Still, he expects overall holiday sales will be only about even with a year ago.

Caution remained. Karen MacDonald, spokesman for mall operator Taubman Centers Inc., noted that stores said many shoppers, remembering the 80 to 90 percent clearance sales they found last year, were asking whether the discounts were going to get any deeper.

And Macerich's Stenholm reported that more people were using cash to pay for gift cards than a year ago, reflecting tight credit and a desire to pay down debt.

The full picture won't be known until merchants report December sales Jan. 7. But most expect merchants' fourth-quarter profits should be intact because they didn't have to cut prices more than they'd planned as they were cushioned by lean inventories.

ShopperTrak is sticking to its prediction for a 1.6 percent gain, compared with a 5.9 percent drop a year ago.

The National Retail Federation expects that total retail sales will slip 1 percent, though some experts say that might be a bit too cautious. A year ago, they fell 3.4 percent by the trade group's calculations.

Those concerns were far from most shoppers' minds, though.

Otis Tyler got up early Thursday to take a 12-mile boat ride from his home on Smith Island in Maryland's Chesapeake Bay to buy his Christmas gifts. From there, he drove 40 minutes to The Centre at Salisbury, Md., hoping to pick up gift cards for his wife and daughter-in-law.

"I always like to do it on Christmas Eve," said Tyler, 60. "It's something I've been doing a long time. It's the hustle and bustle that I like."

Treasury removes cap for Fannie and Freddie aid

The government has handed its ATM card to beleaguered mortgage giants Fannie Mae and Freddie Mac.

The Treasury Department said Thursday it removed the $400 billion financial cap on the money it will provide to keep the companies afloat. Already, taxpayers have shelled out $111 billion to the pair, and a senior Treasury official said losses are not expected to exceed the government's estimate this summer of $170 billion over 10 years.

Treasury Department officials said it will now use a flexible formula to ensure the two agencies can stand behind the billions of dollars in mortgage-backed securities they sell to investors. Under the formula, financial support would increase according to how much each firm loses in a quarter. The cap in place at the end of 2012 would apply thereafter.

By making the change before year-end, Treasury sidestepped the need for an OK from a bailout-weary Congress.

While most analysts say the companies are unlikely to use the full $400 billion, Treasury officials said they decided to lift the caps to eliminate any uncertainty among investors about the government's commitments. But the timing of the announcement on a traditionally slow news day raised eyebrows.

"The companies are nowhere close to using the $400 billion they had before, so why do this now?" said Bert Ely, a banking consultant in Alexandria, Va. "It's possible we may see some horrendous numbers for the fourth quarter and, thus 2009, and Treasury wants to calm the markets."

Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, or about half of all mortgages. Without government aid, the firms would have gone broke, leaving millions of people unable to get a mortgage.

The biggest headwind facing the housing recovery has been the rise in foreclosures as unemployment remains high. Treasury said its latest move could allow Fannie and Freddie to play a bigger role in restructuring mortgages for troubled borrowers.

Treasury officials will provide an updated estimate for Fannie and Freddie losses in February when President Barack Obama sends his 2011 budget to Congress. Though the administration has yet to disclose its long-term plans for the two companies, they are unlikely to return to their former power and influence.

The news followed an announcement Thursday that the CEOs of Fannie and Freddie could get paid as much as $6 million for 2009, despite the companies' dismal performances this year.

Fannie's CEO, Michael Williams, and Freddie CEO Charles "Ed" Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission.

The pay packages were approved by the Treasury Department and the Federal Housing Finance Agency, which regulates Fannie and Freddie.

That pay is far less than what their predecessors earned. Former Fannie CEO Daniel Mudd received $10.2 million in 2008 and former Freddie CEO Richard Syron pocketed $13.1 million. Both execs were ousted when federal regulators seized the companies in September 2008. The federal government blocked exit packages for the pair worth up to $24 million.

The chief executives' pay could spark new criticism about the government's numerous bailouts, but that may be unfounded, said Mark Borges, principal with management consulting firm Compensia.

Haldeman and Williams each could command between $5 million and $10 million in a similar position in the private sector, Borges estimated, and without the notable challenges and public scrutiny they face at these companies.

"I doubt too many people would look at these jobs and say, 'Gosh, I would love to go there for my next career move,'" Borges said. "The government is getting top notch executives to solve problems that are not easy to solve."

The bulk of their pay is also not guaranteed, Borges said, so these executives can't pocket and run and must meet certain long-term goals or risk giving some of it back.

Freddie Mac's board sets the performance goals for the chief executive, which won't be disclosed until next year. Fannie Mae's filing outlined its corporate goals including "being a recognized leader in the housing recovery," "protecting taxpayers," and "managing risk more effectively."

Fannie Mae and Freddie Mac declined to offer further details on CEO performance goals.

Public anger over Wall Street pay boiled over earlier this year. In response, the Obama administration imposed pay curbs on banks that received government bailouts. All the major banks have since repaid their federal money, largely to escape caps on executive pay.

Former Bank of America Corp. CEO Ken Lewis, for example, agreed to forgo his salary and bonus this year under pressure from the government. Last year, he pocketed more than $9 million in total compensation. Bank of America received $45 billion in government assistance, which it has since repaid.

Freddie Mac hired Haldeman, a former mutual fund executive, in July. At the time, the company disclosed his annual salary of $900,000 but did not disclose other incentive payments. In September, the company hired a new chief financial officer, Ross Kari, and said his pay package would be worth up to $5.5 million.

Williams, formerly Fannie Mae's chief operating officer, took over as CEO in April after the first government-appointed CEO, Herbert Allison, took a job at the Treasury Department. Williams earned a base salary of $676,000 last year, plus a retention award of $260,000.

Washington-based Fannie Mae was created in 1938 in the aftermath of the Great Depression. It was privatized 30 years later to limit budget deficits during the Vietnam War. In 1970, the government formed its sibling and competitor McLean, Va.-based Freddie Mac.

Fewer states add jobs as recovery sputters along

In a reversal of earlier gains, more states lost jobs than added them in November, signaling that hiring is occurring only sporadically around the country.

Unemployment rates dropped in 36 states and the District of Columbia, but that trend appeared to reflect more people leaving the work force. Unemployed people who stop looking for jobs out of frustration aren't counted in the labor force.

Friday's Labor Department report underscored that employers have yet to ramp up hiring, and many Americans can't find work. The number of people jobless for at least six months rose last month to 5.9 million, according to a separate report released earlier this month. And the average length of unemployment exceeds 28 weeks, the longest on records dating to 1948.

In all, 19 states added jobs in November, down from 28 in October. Thirty-one states and the District of Columbia suffered a net loss of jobs.

Labor said there were statistically important employment changes in four states. All four showed job losses. They are Michigan, Nevada, Mississippi and Hawaii.

The states that reported the largest jobs gains were Texas, Ohio, Georgia, Arizona and Iowa. Those shifts were not considered statistically important as a proportion of those states' large work forces.

Signs emerged in some states of people rejoining the work force to seek jobs as the economy slowly improves. Of the eight states where unemployment rose, five added jobs. All but one saw their work forces grow, indicating more people were looking for work.

The states that saw their labor forces grow faster than they could add jobs were Ohio, South Carolina, Georgia and Idaho.

The figures for jobs and unemployment don't always match because they come from separate reports. The unemployment rate is calculated from a survey of households. The jobs count reflects a survey of businesses.

Similarly, unemployment rates can drop when people give up looking for jobs. Of the seven states with statistically important drops in unemployment rates, five saw their labor forces shrink. They were Connecticut, Kansas, Kentucky, New York and Pennsylvania.

In Nebraska and Texas, unemployment fell even while people entered the labor force, a sign of relatively robust job markets.

In Texas, hiring was even across many sectors, including finance, professional and business services, education and health, hospitality and government. The only areas to lose jobs were construction; manufacturing; and trade, transportation and utilities.

Nebraska saw job growth in every sector except finance and hospitality, which declined slightly.

Florida was the only state whose unemployment rate rose significantly, to 11.5 percent from 11.3 percent.

Since November 2008, all 50 states have seen a net loss of jobs and a rise in their unemployment rates.

November's jobs picture is bleaker than October's, in part because last month's gains were driven by a rise in temporary employment, economists said. Temporary hiring often is a sign that employers are gearing up to add full-time jobs.

But economists cautioned that October's gains might not be sustainable. They were driven by temporary demand in the auto sector to replace inventories depleted by the Cash for Clunkers rebate program.

Still, the U.S. unemployment rate dropped to 10 percent November from 10.2 percent in October. It was the first unemployment decline since July. Economists called it a hopeful sign that the economy is on the mend, however slowly.

Weekly holiday sales edge up

A research firm says holiday sales rose 1.1 percent last week compared with last year, as consumers are spending more after a post-Thanksgiving lull.

For the week ending Saturday, sales are up 18.2 percent from the previous week, when many shoppers took a break after the busy Thanksgiving shopping weekend.

ShopperTrak RCT Corp., a Chicago research firm that tracks sales at more than 50,000 stores, says spending for Hanukkah boosted sales late last week as well.

Meanwhile, comScore is reporting online sales are higher for the week, up 4 percent compared with last year.

Analysts have generally predicted total holiday sales to be even at best with last year.

Stocks rise on benign reading for consumer prices

A benign reading on consumer inflation boosted stocks as concerns eased that the Federal Reserve will be forced to raise interest rates.

Consumer prices excluding food and energy were flat in November, signaling that inflation isn't working its way into the economy. It was the first time that "core" inflation was unchanged after 10 monthly increases.

Meanwhile the Commerce Department said construction of homes and apartments rose 8.9 percent last month.

The reports come as Federal Reserve policymakers wrap up a two-day meeting on interest rate policy. Investors expect the Fed will hold rates near zero. The Fed's statement following its meeting is expected at 2:15 p.m. EST.

On Tuesday, stocks fell for the first time in five days and Treasurys slipped after a jump in wholesale prices led to speculation that the Fed would have to raise interest rates sooner than expected.

Jim Herrick, director of equity trading at Baird & Co. in Milwaukee, said the latest inflation report reinforced expectations that policymakers won't boost rates until the second half of next year.

He said the report is likely to reassure many investors that it's OK to remain on the sidelines until the end of what has been a strong year for the market.

"Some investors have pretty much closed up their books," Herrick said. "They're not making any new bets."

In midday trading, the Dow Jones industrial average rose 34.24, or 0.3 percent, to 10,486.24.

The broader Standard & Poor's 500 index rose 6.76, or 0.6 percent, 1,114.69. It is up 22.7 percent for the year.

The Nasdaq composite index rose 15.00, or 0.7 percent, to 2,216.05.

Bond prices rose, pushing yields lower, as inflation concerns ebbed. Rising prices eat into the returns of fixed-income investments like bonds. The yield on the benchmark 10-year Treasury note fell to 3.55 percent from 3.60 percent late Tuesday.

A drop in the dollar from a two-month high boosted commodity prices. Gold climbed, while crude oil rose $2.40 to $73.09 per barrel on the New York Mercantile Exchange.

Intel Corp. was the biggest decliner among the 30 stocks that make up the Dow industrials after the Federal Trade Commission accused the chipmaker in a lawsuit of using tactics to snuff out competition. Intel fell 34 cents, or 1.7 percent, to $19.46.

Separately, the European Union dropped antitrust charges against Microsoft Corp. after the company agreed to give users of the Windows operating system a choice of up to 12 other Web browsers. Microsoft rose 34 cents, or 1.1 percent, to $30.36.

More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 429.2 million shares compared with 437.3 million shares traded at the same point Tuesday.

The Russell 2000 index of smaller companies rose 5.54, or 0.9 percent, to 611.85.

In afternoon trading, Britain's FTSE 100 rose 0.7 percent, Germany's DAX index jumped 1.6 percent, and France's CAC-40 advanced 1.1 percent. Japan's Nikkei stock average rose 0.9 percent.

Foreclosure buyer demand dips as supply mounts

U.S. home buyers are less willing to buy foreclosed properties than they were six months ago, citing risks like hidden costs, but demand could grow because of the government's expanded tax credit, a survey showed on Tuesday.

A continued drop in demand for the glut of foreclosed properties would add a fresh layer of pain to a housing market just emerging from a three-year nosedive.

The percentage of Americans at least somewhat likely to consider buying a foreclosed home fell to 43 percent in November, sharply below May's 55 percent, according to a survey by Harris Interactive.

The survey was conducted November 5-9 on behalf of Trulia.com, a real estate search engine, and RealtyTrac, which tracks foreclosures.

Buyer expectations are becoming more realistic, Trulia Chief Executive Pete Flint said on a conference call.

Next year "government interventions will start to disappear, shadow inventory will hit the market and mortgage rates will start to rise" to around 6 percent from under 5 percent, he said. "We're in a false state of stability."

Shadow inventory includes houses that banks now hold but have yet to put up for sale.

Double-digit unemployment will push more owners into foreclosure, further destabilizing the housing market and pressing prices down another 5 to 10 percent, said Flint.

Some closely watched measures show prices have toppled by about 30 percent on average from 2006 peaks. Although prices are rising in some areas, the survey found lingering concern about buying now, when prices could fall still further.

Demand for foreclosed properties, which are often deeply discounted compared with other homes on the market, is of particular concern. RealtyTrac expects over 3 million properties will receive at least one foreclosure notice this year, up from a record 2.3 million last year.

About half of those properties will ultimately go back to banks, RealtyTrac said last week.

The company reported that November was the fourth straight month of declines in foreclosure actions, thanks to various loan modification efforts. But it said many of those problem mortgages would fail anyway.

Foreclosures could escalate to 4 million in 2010, RealtyTrac Senior Vice president Rick Sharga said.

"Unemployment, negative equity are driving factors, as is credit availability," he said. "We don't believe we will get back to normal levels of foreclosure activity on a month-to-month basis until probably the end of 2012, and we will still be going through the shadow inventory well into 2013."

Banks will place the unsold homes on the market at a measured pace to thwart prices on all homes from falling off a cliff anew, he said.

AGE, MARITAL STATUS MATTER

Real estate investors, renters and homeowners looking to "trade up" to a larger house still show strong interest in foreclosed properties, the survey found. Although overall demand dropped, a large share of current homeowners looking to trade up are willing to consider such a purchase.

About 24 percent of homeowners are at least somewhat likely to trade up to a larger home. Of these, 88 percent are at least somewhat likely to consider a foreclosure, the survey found.

Demand from those buyers could rise due to the government's new $6,500 tax credit for current homeowners who buy a new home. These are the "trade-up" or "move-up" buyers.

Buyers looking to lock in that incentive, as well as buyers wanting to take advantage of the $8,000 first-time homebuyer credit, need to sign contracts by the end of April and close on mortgage loans by the end of June.

Fifty-seven percent of renters are at least somewhat likely to buy a distressed home. Demand from renters, as well as all adults, fades as ages rise.

Marital status also impacts demand, with more never-married adults willing to consider a foreclosed property than those who are married, divorced or widowed.

Two-thirds of buyers expect to get a discount of at least 30 percent for a foreclosure.

The survey found that 95 percent of foreclosure buyers are willing to invest in renovations, with more than half expecting to spend 20 percent or more of the purchase price to improve the property. Such spending can help stimulate the economy.

Rise in wholesale inflation unlikely to last

Evidence that the economic rebound could eventually raise inflationary pressures emerged in a report Tuesday that wholesale prices surged last month.

Most economists aren't worried, though. They think the economy remains too weak for the price increases to last.

The Federal Reserve began a two-day meeting Tuesday and is likely weighing the higher-than-expected wholesale inflation. Should inflation pressures mount, the central bank could be forced to start raising interest rates sooner than expected.

But Fed policymakers aren't likely to raise a key rate at the end of their meeting Wednesday. The Fed has kept rates at record lows to bolster the shaky recovery.

An eventual Fed rate increase could help defuse inflation and boost the value of the dollar against other currencies. But it carries risks. Higher interest rates would raise borrowing costs and squeeze corporate profits. They could send stock prices falling. And they risk derailing the economic recovery.

The economy is growing steadily but slowly. The latest sign was a report Tuesday that industrial production rose a better-than-expected 0.8 percent in November. The portion of industrial capacity in use rose to 71.3 percent, from 70.6 percent in October. It shows that factories, mines and utilities are using more of their plants as the recovery takes root.

Still, even with the gain, capacity use remains far below its long-run average of around 80 percent. Analysts said industrial spare capacity remains so large and demand still so soft that inflationary pressures are likely to remain tame.

Overall wholesale prices jumped 1.8 percent in November, the Labor Department said. That was more than double the gain analysts had expected. Core inflation, which excludes energy and food, rose 0.5 percent, the sharpest increase in more than a year.

Much of the overall increase reflected a jump in energy prices. Yet that increase will likely reverse itself. Analysts noted that oil prices have fallen about 10 percent since the start of the month.

And the higher core rate of wholesale inflation was driven by price increases for light trucks, which may be a temporary factor reflecting a shift to new 2010 models.

"The 1.8 percent jump in wholesale prices is a red herring," said Paul Dales, U.S. economist at Capital Economics. "The Fed is not going to see this as any indication that their actions are triggering higher inflation."

One reason is that throughout the economy, few companies have much pricing power in the face of budget-conscious consumers. Kroger Co., for example, posted a lower quarterly profit in part because it's had to cut prices to compete even as its costs have risen.

And higher retail prices for gasoline have proven unsustainable. Valero Energy Corp., the nation's largest oil refiner, shuttered a major refinery over the summer. And it plans to close its Delaware City oil refinery.

The price of crude has risen this year, but refiners haven't been able to pass that along because millions of people have lost jobs and no longer commute. That's helped drive down demand for gasoline. Valero's announcement followed a string of other refinery closings.

Retail gas prices peaked at $2.69 in late October and have been falling steadily ever since.

Stronger activity at mines led last month's increase in industrial production, rising 2.1 percent. The manufacturing sector — the biggest chunk of industrial output — rose 1.1 percent. Utilities fell 1.8 percent, according to the Fed report.

But further gains are likely to be slight. Consumers without jobs or fearful of losing them are holding back spending. Though unemployment dipped in November to 10 percent from 10.2 percent, analysts expect it to resume rising, further dragging on the economy. High unemployment has curbed prices as workers wary of layoffs have moderated wage demands.

"Inflation for the next year or two really will not be a problem in the United States," said Nariman Behravesh.

Behravesh predicted the Fed would not begin raising interest rates until next fall.

"The recovery is still going to be pretty lackluster and somewhat fragile," Behravesh said. "The Fed is not going to do anything to upset the apple cart at a time when inflationary pressures remain very muted."

Wholesale energy prices jumped 6.9 percent in November, the biggest surge since August. Gasoline prices rose 14.2 percent. And the cost of home heating oil jumped 18.3 percent last month.

Still, oil prices have fallen in recent days to around $70 a barrel. That's down from a 2009 high of $82 per barrel hit in October.

Food prices rose 0.5 percent at the wholesale level last month, after a 1.6 percent rise in October. A 4.2 percent increase in the cost of light trucks and sport utility vehicles led the gain.

The Producer Price Index reflects price pressures before they reach the consumer. The government will release its look at consumer prices on Wednesday. Economists say they will show a more moderate gain of 0.4 percent, with core consumer prices expected to rise 0.1 percent.

Stocks trade mixed after inflation data

The stock market zigzagged in a tight range Tuesday after wholesale inflation rose more than expected in November, led by a surge in energy costs.

The increase likely will be discussed as Federal Reserve policymakers begin a two-day meeting on interest rates. The Fed is expected to keep rates unchanged when it releases a policy statement following the meeting Wednesday.

The Labor Department said wholesale prices jumped 1.8 percent last month, more than double the gain analysts expected. Core inflation, which excludes often-volatile food and energy costs, rose 0.5 percent, the biggest increase in more than a year.

A number of investors see a rate hike coming within the next year as the Fed takes a pre-emptive strike to keep inflation at bay. That would help shore up the value of the dollar, but also could trip up a rally that has pushed stocks sharply higher over the past nine months.

Investors also turned cautious after Best Buy said its fourth-quarter profit margins will face pressure as shoppers look for less expensive items. The comments came as the electronics retailer said its third-quarter earnings more than quadrupled.

The market has slowed its nine-month advance in December as traders look to lock in gains for the year and seek clues about what might be able to drive the market in 2010. The benchmark Standard & Poor's 500 index has jumped 64.7 percent from a 12-year low in March on relief that the economy was stabilizing. Analysts say investors will need substantive signs that the economy is improving to extend the gains next year.

Stephen Lieber, chief investment officer at Alpine Woods Investments, said investors are pouncing on any data to determine whether the economy is mounting a sustained recovery. He said the uncertainty is keeping some traders out of the market.

"The market is in a waiting game," he said.

In midafternoon trading, the Dow Jones industrial average fell 40.88, or 0.4 percent, to 10,460.17. The S&P 500 index fell 4.02, or 0.4 percent, to 1,110.09, and the Nasdaq composite index fell 1.52, or 0.1 percent, to 2,210.58.

Major stock indexes closed at new highs for the year Monday as concerns eased about global debt problems.

Meanwhile, the National Association of Home Builders said its housing market index fell in December on concerns that that a national unemployment rate of 10 percent will curb demand for new homes. The trade group said its index slipped one point to 16, the lowest level since June.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.61 percent from 3.56 percent late Monday.

The dollar rose against other major currencies, while gold prices fell.

Crude oil rose $1.41, to $70.92 per barrel on the New York Mercantile Exchange.

Best Buy fell $4.12, or 9.1 percent, to $41.25.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 652.5 million shares, compared with 644.9 million shares traded at the same point Monday.

Overseas, Britain's FTSE 100 fell 0.6 percent, Germany's DAX index rose 0.2 percent, and France's CAC-40 added 0.1 percent. Japan's Nikkei stock average fell 0.2 percent.

Unions pressure Democrats on health insurance tax

Unions leaders, among the most passionate backers of President Barack Obama's health care overhaul, pressed Democratic senators Thursday to drop a tax on high-value insurance plans to pay for remaking the nation's system.

As the Senate entered its 11th straight day of debate on the sweeping legislation, members of several labor unions denounced the proposed tax on so-called "Cadillac plans," arguing it wouldn't just hit CEOs but also middle-class Americans who passed on salary increases to negotiate better health benefits.

"I support health care reform but I can't afford this tax," Valerie Castle Stanley, an AT&T call center worker and member of the Communications Workers of America, said at a news conference outside the Capitol. "For families like mine that are on a budget, the results will be devastating."

At issue is a proposed 40 percent excise tax on insurance companies, keyed to premiums paid on health care plans costing more than $8,500 annually for individuals and $23,000 for families. The tax would raise some $150 billion over 10 years to help pay for the Democrats' nearly $1 trillion health care bill. The legislation, which appears to be edging closer to passage, would revamp the U.S. health care system with new requirements on individuals and employers designed to extend health coverage to more than 30 million uninsured Americans.

The insurance plan tax already was adjusted higher in response to union members' concerns, and Sen. John Kerry, D-Mass., a leader of those efforts, has said there could be further changes. But labor organizations including the AFL-CIO and the National Education Association are urging the Senate to drop the tax entirely and take the approach embraced by the House, which would raise income taxes on individuals making more than $500,000 a year and couples making more than $1 million.

Union leaders have brought hundreds of members to the Capitol this week to lobby lawmakers.

"We should tax the millionaires, not teachers and bus drivers," said Lily Eskelsen, vice president of the National Education Association.

Sen. Bernie Sanders, I-Vt., who spoke at Thursday's news conference, has authored an amendment with Sen. Sherrod Brown, D-Ohio, to strip out the insurance plan tax, but doesn't yet have agreement from Senate leaders to offer it. A number of Senate Democrats and White House officials support the insurance plan tax because they believe it would help hold down health care costs by providing an incentive for companies and workers to spend less on health care packages.

On the Senate floor Thursday, Sens. Byron Dorgan, D-N.D., and John McCain, R-Ariz., pushed an amendment to allow U.S. pharmacies and drug wholesalers to import Food and Drug Administration-approved drugs from Canada, Europe and a few other countries. It was unclear when a vote would take place, and people on both sides of the issue said it will be tough for supporters to get the 60 votes they'll need to win.

As a candidate, Obama supported allowing U.S. consumers to order lower-cost prescriptions from abroad. As president, he needs the backing of the drug industry to push his health care bill through Congress. While administration officials contend the president still agrees in principle, the FDA is saying it would be difficult to fully guarantee the safety of imports, lending weight to the industry's main argument.

The most crucial work on the overall bill was being done behind closed doors, where Senate Majority Leader Harry Reid, D-Nev., and his lieutenants were hunting support for a tentative deal among moderate and liberal Democrats to expand the government's role in providing care.

In a bow to a crucial bloc of liberals, the compromise drops a full-blown government health plan that's a top priority for liberals. Instead, the same federal agency that negotiates health insurance for federal workers and members of Congress — the Office of Personnel Management — would administer national, nonprofit plans available to the public.

In addition, Medicare, currently for those age 65 and up, would be offered to people who are at least 55 and wished to purchase coverage.

Reid and moderate Sen. Ben Nelson, D-Neb., continued talking about restrictions conservatives want on how to prevent federal health care funds from being used to finance abortions.

Stocks rise as trade deficit narrows in October

The stock market rose Thursday as an improvement in the nation's trade deficit offset a weaker-than-expected reading on jobs.

The Commerce Department said a surge in exports helped narrow the trade deficit in October to $32.9 billion. Economists had been expecting an increase. The rise in exports was driven by a weaker dollar, which helps boost overseas demand for U.S. exports.

The increase in demand for U.S. exports for a sixth straight month signals that makers of autos, aircraft and industrial machinery as well as farmers are seeing increased demand overseas.

James Cox, managing partner at Harris Financial Group, said the increased demand for U.S. goods will help boost the nation's economy.

"These smaller trade balances are great news," Cox said. "Any time you have a small trade balance, that will really contribute greatly to GDP."

The trade figures helped offset mixed jobs numbers. The Labor Department said the number of laid-off workers seeking jobless benefits rose more than expected last week to 474,000 after falling for five straight weeks, slightly higher than analysts were expecting. However the four-week average, which is less volatile, fell to the lowest level since September 2008.

The gains in stocks came even as the dollar rose. For months, stocks and the dollar have moved in the opposite direction. Record-low U.S. interest rates have pressured the dollar for much of this year, leading investors to buy assets like stocks and commodities that can earn better returns than cash.

In recent weeks, signs of improvement in the economy have brought expectations that the Federal Reserve might raise interest rates sooner than expected. That would strengthen the dollar.

In midday trading, the Dow Jones industrial average rose 72.86, or 0.7 percent, to 10,409.91. The Standard & Poor's 500 index rose 7.21, or 0.7 percent, to 1,103.16, while the Nasdaq composite index rose 13.25, or 0.6 percent, to 2,196.98.

As the end of the year approaches, investors have become more cautious in their trading, not wanting to lose the big gains they've made during the market's rally. The Standard & Poor's 500 index, which rose as much as 65 percent from its lows in March, has moved little over the past month.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.49 percent from 3.44 percent late Wednesday.

Gold rose after a four-day slide, while oil rose 2 cents to $70.69 a barrel at the New York Mercantile Exchange.

Two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 397.9 million shares compared with 403.6 million shares traded at the same point Wednesday.

The Russell 2000 index of smaller companies rose 1.87, or 0.3 percent, to 599.90.

Japan's Nikkei stock average fell 1.4 percent. Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 1.1 percent, while France's CAC-40 rose 1.1 percent.

Goldman Sachs execs won't get 2009 cash bonus

Goldman Sachs Group Inc.'s top executives will not receive cash bonuses this year, as the Wall Street giant bows to sharp criticism over its pay practices.

The executives will instead receive stock that cannot be sold for at least five years, the New York-based bank said Thursday.

The majority of compensation for Goldman's senior management has traditionally been paid out in year-end bonuses.

Goldman has been among the strongest banks in the country during the past year, quickly recovering from the credit crisis. As its profits started to swell, critics questioned Goldman's lavish pay packages at a time when the broader economy was still weak.

"The measures that we are announcing today reflect the compensation principles that we articulated at our shareholders' meeting in May," Goldman CEO Lloyd Blankfein said in a statement.

Shares of Goldman fell 54 cents to $165.90 in midday trading.

Oil prices slip under $75 dollars per barrel

World oil prices sank under 75 dollars per barrel on Monday, falling in line with other commodity markets, as traders took their cue from a stronger dollar, dealers said.

New York's main contract, light sweet crude for January delivery, dipped 99 cents to 74.48 dollars a barrel.

Brent North Sea crude for January delivery shed 72 cents to 76.80 dollars per barrel.

"Crude oil markets slipped below 75 dollars per barrel, following more US dollar strength and weaker European and Asian equity markets," said analysts at the Sucden Financial Research brokerage in London.

In foreign exchange trade, the dollar strengthened against the euro, drawing further support from stronger-than-expected US jobs data that was published before the weekend, analysts said.

In early morning deals, the euro sank as low as 1.4756 dollars, the lowest point since early November. It later pulled back to 1.4822.

A strengthening greenback makes dollar-priced crude more expensive for buyers using other currencies. In turn, that tends to dampen oil demand and prices.

Crude futures tumbled on Friday in volatile trading, succumbing to a strong dollar after news of a dramatic improvement in the troubled US labour market.

Official US data showed that job losses narrowed to 11,000 in November, a tenth fewer than in October, and the unemployment rate dipped to 10.0 percent.

That was the best official reading for job losses since December 2007 when the economy entered recession, raising hopes for a revival of US energy demand.

"A surprise drop in US unemployment supported the dollar as it led to expectations that the Fed might revise its policy stance sooner than expected," said analysts at the John Hall Associates consultancy in a note to clients.

Oil prices had risen in earlier Asian trading on Monday, as the US dollar had weakened, and amid indications from oil cartel OPEC that it was satisfied with current prices.

There were signals from the Organization of Petroleum Exporting Countries (OPEC) that it was not going to cut production quotas at an upcoming meeting on December 22, analysts said.

"The chatter out of OPEC is that they are happy with the current pricing, there's going to be no increase in production," said Victor Shum, senior principal of Purvin and Gertz energy consultants in Singapore.

Saudi Arabia stated over the weekend that oil prices were "perfect" and the global market was stable as Arab heavyweights in the OPEC cartel appeared united in their support for maintaining production quotas.

"Everything is so good now, we don't have to think very hard," Saudi Oil Minister Ali al-Naimi said in Cairo, reflecting an agreement among OPEC members to keep production quotas unchanged at the conference.

Dubai World looks to sell assets in quest for cash

Dubai World, the cash-strapped conglomerate at the center of Dubai's debt crisis, appears set for an unaccustomed period of retrenchment after the emirate's top finance official said Monday the company may need to change course and unload assets as it struggles to pay back lenders.

What eventually gets sold remains uncertain. Clearer is the city-state's position that the government itself won't be responsible for Dubai World's debts, renewing questions about its backing of other state-run companies.

"Like any company that has commitments, part of getting liquidity is selling some assets. Of course local or foreign assets," Dubai Finance Department Director-General Abdul Rahman al-Saleh said in an interview aired by Arab satellite channel Al-Jazeera on Monday.

"These are assets of a company, not assets of a government," he said, adding later that the restructuring was aimed at keeping Dubai World viable going forward.

The comments appeared to cement concerns that Dubai was washing its hands of debts racked up by companies it created and backed during the city-state's frenetic boom years earlier this decade. Easy money and unbridled ambition transformed the tiny sheikdom from desert hamlet to pulsing Arab boomtown.

Dubai's main bourse fell 5.8 percent by close of trading Monday, with stocks sinking to their lowest level in more than four months.

The sale of any major Dubai World holdings would mark a stark about-face for the conglomerate, that repeatedly downplayed talk it might need to unload pieces of its rapidly acquired global empire even as Dubai's financial concerns grew more acute over the past year.

That perception began to shift last week when the company announced its restructuring would include an assessment of options to reduce its debt load, "including asset sales."

"This is the inevitable next step, really," said Christopher Davidson, a professor at the University of Durham who has written extensively about the history and politics of the UAE.

Davidson and others said they expected some of Dubai World's overseas property would be among the first on the auction block.

"It's damaging for their reputation, but it doesn't do much to alter the status quo back home," Davidson said.

A Dubai World spokeswoman declined to comment.

Dubai World has already taken off the bargaining table some key assets, including its profitable port operator.

Other state-run crown jewels not part of the conglomerate, such as the Middle East's biggest airline Emirates, are also unlikely to be sold for now, analysts say.

Emirates airline President Tim Clark said in an e-mailed response to questions he was unaware of any plans to sell part or all of the carrier.

"This would be a decision for our shareholder, the government of Dubai," he said.

Clark added, however, that like Dubai World's, "none of Emirates' debts are guaranteed by the government."

Dubai World's story was essentially that of Dubai — a heavy reliance on borrowed money in recent years to carve out markets far beyond the tiny emirate's shores while building up the city-state, one of seven semiautonomous entities making up the United Arab Emirates.

The company runs the world's fourth-biggest seaport operator, DP World, with operations on six continents. Its wide-ranging investment portfolio includes luxury retailer Barney's New York, a stable of high-end U.S. hotels, and stakes in Las Vegas casino operator MGM Mirage and Cirque du Soleil. Its holdings are so diverse and spread out that its slogan boasts: "The sun never sets on Dubai World."

The emirate, however, shocked global markets on the eve of an Islamic holiday in the Middle East and Thanksgiving in the United States when it announced plans to restructure the conglomerate. The news stoked fears, at least temporarily, that the world's economic recovery was on shakier footing than many believed.

The government said Dubai World would request a delay in paying some of the $60 billion in debt coming due including those of its real estate arm, Nakheel. That subsidiary has $3.5 billion in bonds that must be paid or refinanced by next week.

Many lenders in Dubai and abroad lent Dubai World money on the assumption that, as a company controlled by the government, it had implicit state backing.

"Banks believed the Dubai government ... would not want to risk its reputation, but (the) government effectively called their bluff" when it asked for new repayment terms, said Jan Randolph, director of sovereign risk at IHS Global Insight.

Al-Saleh reiterated the Dubai government's position that there is no state guarantee in Dubai World — remarks that sent stocks tumbling. Shares of market indicator Emaar Properties, builder of the world's tallest skyscraper, dropping by the maximum allowed 10 percent. Dubai's government owns just under a third of the developer.

Al-Saleh said Dubai World's problems stemmed from a reliance on previously easy-to-get, short-term loans that were used to finance long-term projects like luxury high rises and even more manmade islands.

"Most of Dubai World loans range from three to five years, whereas the projects that were financed range from 25 to 30 years," he said. "The difference between the finance terms and carrying out the projects led to this crisis."

Stocks rise as investors await Bernanke speech

Stock indexes edged higher Monday as investors tried to predict when interest rates might start rising.

Commodities including gold and oil fell, while Treasury prices rebounded from a slide last week.

The dollar slipped against other currencies ahead of comments from Federal Reserve Chairman Ben Bernanke, who is scheduled to speak at an afternoon gathering of the Economic Club of Washington.

Bernanke has said that the Fed plans to keep rates low for the foreseeable future, but investors believe that as the economy improves the central bank might move to raise rates and withdraw other measures to boost the economy including low-interest loans to big banks. That could reverse the dollar's months-long slide and put a dent in the stock market's advance.

Concerns about the Fed's next move have heightened since Friday, when investors got one of the best indications yet that the economy is strengthening. The Labor Department said employers cut fewer jobs in November than at any time since the recession began at the end of 2007. Also, the unemployment rate dropped to 10 percent from a 26-year high of 10.2 percent.

Stocks had jumped after Friday's employment report, but gave up most of their early gains as expectations of a possible rate hike grew and the dollar rose. Some analysts say the market overreacted in predicting that interest rates were due to rise, however.

"We have a slowly recovering economy," said Robert MacIntosh, chief economist at Eaton Vance Management. "I don't think you need to worry about the Fed changing their mind and raising rates anytime soon."

In midday trading, the Dow Jones industrial average rose 27.89, or 0.3 percent, to 10,416.79. The Standard & Poor's 500 index rose 1.16, or 0.1 percent, to 1,107.14, while the Nasdaq composite index rose 0.49, or less than 0.1 percent, to 2,194.84.

The ICE Futures US dollar index slipped 0.2 percent. Gold prices fell, and oil dropped 87 cents to $74.60 a barrel on the New York Mercantile Exchange.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.44 percent from 3.48 percent late Friday.

On Friday, the Dow rose just 23 points, after having been up as much as 151 points early in the day. All major stock indexes finished the week higher.

Low interest rates and the resulting slide in the dollar have helped fuel the stock market's advance since March. The weak dollar has encouraged investors to buy stocks, commodities and other higher-yielding assets. If the Fed were to raise rates, that would be a good sign that the economy is strengthening. However, investors could curb their buying of stocks and look for ways to make more money elsewhere as rates rise.

A stronger dollar could also hurt companies that produce commodities and have large international operations. Those companies make more money when the dollar is weak and overseas sales are translated into greenbacks. A weaker dollar also makes their goods and services cheaper for foreign buyers.

Stocks are likely to drift as investors await more details from the Fed, which will host its last policy meeting of the year next week. Reports on international trade, business inventories and retail sales are among this week's economic data.

In other trading, the Russell 2000 index of smaller companies rose 1.18, or 0.2 percent, to 603.97.

Three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 383.9 million shares compared with 645.7 million shares traded at the same point Friday.

Overseas, Japan's Nikkei stock average rose 1.5 percent, while Hong Kong's Hang Seng index slipped 0.8 percent. Britain's FTSE 100 fell 0.2 percent, Germany's DAX index fell 0.6 percent, and France's CAC-40 rose 0.2 percent.

GE to buy $345 million of ads from NBC Universal

General Electric Co. has promised to buy at least $345 million in advertising from NBC Universal over five years after selling a controlling stake in the entertainment company to Comcast Corp., according to a regulatory filing Friday.

GE pledged to buy at least $59 million worth of ads in the new NBC Universal each year for five years after the sale of a 51 percent stake to Comcast, expected to close in about a year. In addition, GE is required to buy $50 million worth of ads in connection with the 2012 Olympic Games, whose rights NBC holds.

Comcast disclosed the details in a Securities and Exchange Commission filing that also covered terms of GE's divestiture rights for NBC Universal, tax matters, intellectual property and others.

In 2008, GE spent $1.2 billion on advertising across all media outlets, but most of the money went toward marketing of NBC Universal's movies, said TNS Media Intelligence. The regulatory filing did not say whether the $59 million represents an increase or decrease over what it would have spent outside the movie ads.

The filing also said that Comcast can't sell or transfer its stake in NBC Universal for four years and GE is similarly obliged for 3 1/2 years. After that, the companies can either sell all or a portion of their stakes. Comcast can buy out GE entirely in the eighth year after the deal's close.

The new company will get three Comcast-appointed directors and two from GE. If GE's ownership falls below 20 percent, it will have to give up one board seat, and if its stake falls below 10 percent, it will have no representatives on the board. Comcast will take these board seats.

If the CEO job at NBC Universal becomes vacant within the first 3 1/2 years of operations at the new company, GE has the right to veto up to two replacements proposed by Comcast.

A separate SEC filing made by GE shows that NBC Universal already has a commitment from lenders for $9.1 billion in loans. NBC Universal is giving that money to GE, which is buying Vivendi SA's 20 percent stake of the entertainment company for $5.8 billion in order to sell a majority stake to Comcast.

On Thursday, Comcast said it would pay GE $6.5 billion in cash and contribute $7.25 billion worth of assets for control of NBC Universal. Regulators are to expected to review the deal, which would create one of the nation's largest entertainment conglomerates.

Shares of Comcast, based in Philadelphia, were up 22 cents to $16.13 on Friday. GE, based in Fairfield, Conn., was up 20 cents to $16.20.

Riso replaces Kellman as Care CEO

Care Investment Trust Inc., a real estate investment trust that invests in healthcare-related real estate and commercial mortgage debt, said Friday that Salvatore Riso Jr. had become chief executive officer.

Riso replaced F. Scott Kellman, who informed the company's board that he would resign at the end of the day Friday.

Riso had served as the company's secretary and chief compliance officer since February 2008.

Prior to that, he was a senior vice president and chief counsel of the corporate finance group at CIT Group Inc.

Care also said that Chief Finance Officer Paul Hughes would replace Riso as chief compliance officer and secretary.

Care shares rose 37 cents, or 4.6 percent, to close at $8.42 on Friday.

Stocks climb as employers cut fewer jobs

Investors grew more confident about the economy but also worried that a brighter employment picture will mean rising interest rates.

Stocks closed higher Friday but only after giving up much of their earlier gains. Indexes touched new highs for year in the morning following news that job cuts fell sharply in November, but that report also brought expectations that the Federal Reserve could hike rates or remove other supports from the economy. Treasurys and gold fell as demand for safe-haven investments eased.

Jitters about interest rates left the Dow Jones industrial average with a gain of just 23 points, having been up as much as 151 points earlier. Stocks rose for the week.

The prospects of increased rates also led to a sharp rise in the dollar, which hurt prices for commodities including oil.

The Labor Department said the economy shed 11,000 jobs last month, the smallest monthly loss since December 2007, when the recession began. That's much better than the 130,000 losses Wall Street economists expected and an improvement from 111,000 jobs cuts in October.

The unemployment rate fell to 10 percent from a 26-year high of 10.2 percent in October. Economists had expected the rate to remain unchanged.

Stocks have been rising for nine months on hopes of a recovery, but investors have been worried that lingering unemployment would hold the economy back. The gains in stocks also come as the Fed's policy of low interest rates and extraordinary supports for the financial system have flooded financial markets with cash. Investors are now on edge about how markets will respond when policymakers begin to withdraw some of those measures.

Phil Orlando, chief equity market strategist at Federated Investors in New York, said the jobs report could draw investors into the market who had been skeptical about how well the economy was doing.

"This number was just phenomenal," Orlando said. "That sound you heard was bears fainting all across America and hitting their head on the pavement."

The Dow ended with a gain of 22.75, or 0.2 percent, to 10,388.90 after reaching a 2009 high of 10,516.70 in early trading. The Dow lagged broader indexes after DuPont, the chemicals company, warned it would delay release of several products.

The Standard & Poor's 500 index rose 6.06, or 0.6 percent, to 1,105.98, after setting a 2009 high of 1,119.13.

The Nasdaq composite index rose 21.21, or 1 percent, to 2,194.35, reaching a high for the year of 2,214.39.

For the week, the Dow rose 0.8 percent, the S&P 500 index added 1.3 percent and the Nasdaq advanced 2.6 percent.

The jobs report weighed on bond prices, pushing yields higher. The benchmark 10-year Treasury note fell three-quarters of a point, pushing its yield up to 3.48 percent from 3.38 percent late Thursday.

A rise in the dollar held back an advance on the stock market. For months, stocks have fallen when the dollar strengthens because a rising greenback makes commodities more expensive for foreign buyers and can eat into the profits U.S. companies collect from overseas.

The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, rose 1.4 percent.

Gold fell $78.80 to $1,169.50 an ounce on the New York Mercantile Exchange. Meanwhile, crude oil fell 99 cents to settle at a seven-week low of $75.47 a barrel.

Charlie Smith, chief investment officer at Fort Pitt Capital in Pittsburgh, said some traders are worrying that the Fed will try to wean big banks from low-cost loans and disrupt trades that have been profitable this year. He contends that spoiling the easy trades could prompt banks to boost lending as they look for more places to put their money.

"It forces the bankers to be bankers instead of just sort of taking the free money from the Fed and buying Treasurys with it," Smith said.

The week began as the market closed a strong November. The S&P 500 index advanced 5.7 percent for the month, its biggest increase since July. The index, which is used to measure many investments like mutual funds, has risen 63.5 percent from a 12-year low in March.

Stocks recovered during the week from worries that debt problems in the Middle Eastern city-state of Dubai would trigger a wave of credit problems like the kind that felled the brokerage Lehman Brothers last year.

Investors will have fewer economic reports to go on next week, but are likely to again take cues from the direction of the dollar. Reports are due on retail sales and consumer sentiment.

Among stocks, DuPont fell $2.49, or 7.2 percent, to $32.34 after the company said it would delay release of certain corn and soybean seeds.

Two stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6 billion shares compared with 4.9 billion Thursday.

The Russell 2000 index of smaller companies rose 14.01, or 2.4 percent, to 602.79.

Overseas, Britain's FTSE 100 rose 0.2 percent, Germany's DAX index rose 0.8 percent, and France's CAC-40 jumped 1.3 percent. Japan's Nikkei stock average rose 0.5 percent.
_____

The Dow Jones industrial average closed the week up 78.98, or 0.8 percent, at 10,388.90. The Standard & Poor's 500 index rose 14.49, or 1.3 percent, to 1,105.98. The Nasdaq composite index rose 55.91, or 2.6 percent, to 2,194.35.

The Russell 2000 index, which tracks the performance of small company stocks, rose 25.58, or 4.4 percent, for the week to 602.79.

The Dow Jones U.S. Total Stock Market Index — which measures nearly all U.S.-based companies — ended at 11,231.20, up 183.08, or 1.7 percent.

New jobless claims fall unexpectedly to 457K

The tally of newly laid-off workers seeking unemployment benefits fell unexpectedly for the fifth straight week, a hopeful sign that the job market is slowly improving.

Still, claims remain above the levels that most analysts say would be consistent with an economy that is adding jobs. The unemployment rate is at 10.2 percent and expected to keep climbing into next year.

First-time claims for unemployment insurance dropped by 5,000 to a seasonally adjusted 457,000, the lowest total since the week of Sept. 6, 2008, the Labor Department said Thursday. Wall Street economists expected an increase, according to a survey by Thomson Reuters.

The ongoing decline in claims signals that employers could start adding jobs by as early as January or February, economists said. The nation's economy has shed jobs for 22 straight months, the longest stretch since World War II.

"The surprise further drop in jobless claims ... is a very encouraging sign that the U.S. economy may be closer to the point of net job creation than we had thought," John Ryding, an economist at RDQ Economics, wrote in a research note.

Many economists say that claims need to fall to about 425,000 for at least a month to indicate that employers are hiring more people than they are firing.

The department's employment report for November, to be released Friday, is expected to show that employers shed another 130,000 jobs after cutting 190,000 in October. Economists forecast the unemployment rate will remain at 10.2 percent.

A Labor Department analyst said the closing of state unemployment offices for last week's Thanksgiving holiday was responsible for some of the decline.

Economists closely watch initial claims, which are considered a gauge of layoffs and a sign of whether companies are willing to hire.

The four-week average of claims, which smooths out fluctuations, dropped for the 13th straight week to 481,250, about 180,000 below the peak for this recession, reached this spring.

But the Federal Reserve said in a report Wednesday that employers in most regions are reluctant to hire new workers, even as the economy stages a modest recovery.

Meanwhile, the number of people claiming unemployment benefits for more than a week rose by 28,000 to 5.5 million, the department said. Analysts had expected a decline.

That total doesn't include millions of unemployed Americans that are receiving benefits under extended programs paid for by the federal government.

About 4.5 million people were receiving extended benefits in the week ended Nov. 14, the latest data available. That's an increase of about 300,000 from the previous week. The jump is a result of Congress adding another 14 to 20 weeks of extra benefits last month, the fourth extension since the recession began and the longest total extension on record.

That boosted the total number of weeks a person could collect unemployment to as much as 99 in the hardest-hit states.

Layoffs continued this week. Gannett Co. said it was cutting 26 newsroom jobs at its flagship USA Today newspaper and eliminating 11 positions at USA Weekend magazine. Another media company, the Greenspun Media Group, which publishes the Las Vegas Sun, announced it was reorganizing its operations in a cost-cutting move and would lay off an unspecified number of workers.

Among the states, California had the largest increase in claims, with nearly 15,000, which it attributed to layoffs in the service industry. Illinois, North Carolina, Pennsylvania and Texas had the next largest increases. The state data lag initial claims by one week.

The largest decrease in claims was in Michigan, with a drop of 1,242, which it attributed to fewer layoffs in the auto industry. Indiana, Hawaii, Oregon and the Virgin Islands also reported declines.

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